Informal workers in Arab world
hit hardest by coronavirus crisis

In the normally bustling Mar Mikhael neighborhood of Beirut, a fruit seller keeps his doors open while a butcher prepares to shut down his shop. -- Courtesy photo

By Lauren Holtmeier

and Mona Alami

CORONAVIRUS lockdowns hit poor people working in the informal economy hardest, but they are also the least likely to receive aid or healthcare from the government or heed calls to stay home, experts say.

In the Middle East, middle-income Arab countries like Lebanon, Egypt, Jordan, Morocco, Tunisia, and Libya have large populations of informal workers, who depend on daily wages and have small safety nets to fall back on when they find themselves suddenly out of work.

Iraq, considered an upper-middle income country with its oil wealth, faces similar problems as its regional brethren as it has a large population of informal workers as well.

“These are old problems that are now becoming very apparent because of coronavirus,” Luca Pellerano, senior social protection specialist at the ILO Regional Office for Arab States told Al Arabiya English.

In Lebanon, 55 percent of workers fall into this category and do not have paid sick leave or vacation days, according to data from the International Labor Organization (ILO). In Jordan, the situation looks similar to Lebanon. Both countries also have large populations of Syrian refugees who eke out a survival in the informal sector.

In Egypt, the country’s informal sector accounts for 40 percent of gross domestic product (GDP), PwC data show. In Morocco, there were around 2.37 million workers in the informal economy in 2014 in a population of 35 million, according to the International Monetary Fund.

Iraq’s systemic weaknesses place it in an unfavorable economic position to fight COVID-19. Iraq has oil wealth, but 4 million work for the state and 3 million receive pensions from the state, says Ahmad Tabaqchali, senior fellow and the Institute of Regional and International Studies in Iraq. The government’s budget, which is largely reliant on those oil revenues, will be eroded by $33-$52 billion, depending on oil prices, he said. Its budget for 2019 was $89 billion, of which $63 billion were earmarked for salaries, pensions and social security, he explains.

“Additionally, the southern regions depend on religious tourism that has grinded to a halt,” Tabaqchali said.

None of these states have particularly healthcare systems, and many lack access to those systems, because of their status within the formal system.

Where many of these workers spend their days on the street driving cabs, selling food or hawking consumer goods, healthcare becomes a matter of personal and public health, he said.

Countries across the region have implemented lockdowns of various scale and most have temporarily suspended flights to slow the spread of COVID-19, but few have developed policy responses to the vast numbers of informal economy workers.

“I’m not sure any government outside Western Europe and North America really have the capacity to do much,” Alterman said.

The US recently announced a $2 trillion stimulus package to help American people and businesses.

Lebanon announced it would give families around $150-$200, well below the country’s minimum wage of $450 a month. For middle income countries with weak institutions, other more targeted approaches are needed, Pellerano said.

“In countries like Lebanon and Jordan it’s a harder approach,” Pellerano said. “They’ll have to identify individuals and businesses that are particularly vulnerable and target them. They have to support household income but also support businesses to ensure they can quickly get back on their feet as economic lockdown measures are lifted.”

For Dr. Shadi Saleh from the Global Health Institute, containment measures to slow the epidemic will need to be done in conjunction with an economic support package, targeting the poor and disadvantaged. For Lebanon alone, Saleh believes that by targeting a minimum of 300,000 people living in extreme poverty, the government will need to inject monthly $135 million.

In middle income countries, governments do have some capacity to expand protection measures to groups who most need it, Alterman said.

“They can provide food and services to people, though distribution is hard. There’s an expectation they’ll do something to continue education,” Alterman said. “There’s some ability to diagnose [coronavirus].”

But like many of the people in these states, these governments also have little to fall back on. Lebanon, for example, which is currently in the midst of an economic crisis, recently defaulted on its sovereign debt and has one of the highest debt-to-GDP ratios in the world.

In the past, these states have relied on their wealthy Gulf neighbors, but that funding may not be available this time. Jordan and Egypt have received less in the last few years from the Gulf, and Lebanon has likewise received less funding because of Hezbollah’s control over government and Iran’s influence, Alterman said.

“The other piece of this is with oil prices at historic lows, the tradition of having wealthy Gulf States bailing out their poorer cousins is unlikely to work,” he said.

Gulf States will likely have to focus on bailing out their own economies as the coronavirus crisis drags on.

Unorthodox responses

Left to their own devices, countries must quickly come up with solutions to help all those affected by coronavirus, and that doesn’t only include those at the bottom.

“It is clear that the unprecedented health but also economic crises we’re witnessing requires unorthodox response policies to all challenges,” the ILO’s Pellerano said.

Countries worldwide are increasing childcare benefits, old age benefits and disability benefits, but most support is targeted to those in the existing formal system.

Meanwhile, the crisis is already taking its toll.

In Lebanon, a video emerged of a cab driver setting his car on fire, frustrated with the lack of work. Experts question whether Arab governments will be able to move fast enough to address the impact of the crisis on the poor.

In Lebanon, the World Bank warned in November 2019 that poverty could rise to 50 percent while Banker Dan Azzi has put unemployment at 37 percent.

“If local demand is suppressed because families don’t have available resources to spend and acquire what they need, then it’s a negative spiral that makes any recovery harder in the medium to long run,” Pellerano said. -- Al Arabiya English